I'm Aaron Watts, a media credit analyst here at Deutsche Bank. Next up, we have Entravision with us, and they have been a consistent participant in our conference, which we appreciate. On stage with me is Chris Young, the Chief Financial Officer of the company. Chris, thank you very much for being here. Aaron, thanks for having us. It's been, I've been doing this since, as just mentioning, since 2008. So- Yeah. It's been a great experience. This is always a great conference to come to, so thanks for having us. Now, this is our first time being here together since the passing of Walter, who is clearly missed. You stepped in to lead the company in his stead, and recently in July, Michael was announced as CEO. That's right. To kick us off, maybe share a bit of background on Michael. What makes that a good fit for the company? Should we be expecting any changes in strategic direction or scope? And where is his focus gonna be for his first year? What are his priorities? Yeah. So Mike comes to us with a diverse background. He's got experience in both his investment banking over at Allen & Company, and operating experience primarily in the digital media space, as well as software. So his focus right now, as mandated by the board, is to help our organization achieves more significant organic growth with the investments that we've already made and the assets that we have in-house. We have, in over the past several years, been very active on the acquisition front. I think we're gonna hit the pause button for the moment, focus on internal operations, become more efficient, and hopefully that will help drive margins going forward. But he is uniquely focused on enhancing the overall efficiency of our existing operations. Do you envision digital continuing to drive growth going forward and continuing to increase its share of your overall revenue pie relative to the TV and radio business? We do. Digital is going to be the growth driver for Entravision for the foreseeable future, and I would not be surprised if it continues to become an even larger part of our revenue base going forward. Okay. So, let's start with your digital segment, given that comment. It now comfortably accounts for 80%+ of your revenues. You've added and developed programmatic digital solutions over the last few years with your DSP business, Smadex, and you've built on that with your acquisitions of Cisneros- Right. ... MediaDonuts, as well as other strategic investments. More recently, current events, in May, you acquired a global mobile app marketing solutions company based in Barcelona. Right. You're operating in 40 countries all over the globe. Right. Is your platform now built out, and have you captured all the low-hanging fruit, or is there room for further expansion? Should we expect further M&A, even though I did hear you say you'd hit the pause button for now? Well, we've hit the pause button, but, but BCNMonetize is a great example of an operation based in Barcelona, but they also have a significant presence in Turkey, and we're talking to several major platforms, digital platforms, that have an interest in contracting with the company in Turkey to help drive sales. So there is a strategic reason for that particular acquisition. But, but look, there, there's room for more acquisitions over time, where I don't necessarily think we're done. But for the immediate future, as Mike gets strapped in and, and re-rationalizes how our organization functions, like I said, we're gonna be we're gonna be focused on just internal efficiencies as he figures things out. Okay. So pro forma digital revenues were up 18% in the second quarter. You've guided them similarly in the third quarter, certainly better than traditional media. But perhaps you can talk about what you're seeing and hearing from advertisers at the moment, and whether you're anticipating building momentum to close out this year and rolling into next. Sure. I think the best way to put it is, the first half of this year was. Look, it was choppy for us. It was choppy for a lot of folks. The global economy slowed down. You've got a rising interest rate environment, which is dampening the growth prospects of the economy. But look, if you— we're convinced that if you into next year, when we look back at this year, the second half of this year will be much stronger than that of the first half. But time will have to play that out, but we like what we saw. In the third quarter, we'll talk about that in November on our earnings call, but clearly, we think that we are of the belief that the worst is behind us as far as the choppiness is concerned. Absent acquisitions, normalized type growth rates for the digital business, is there a goalpost you have in mind for how we should think about that, a normalized type of- Yeah. Okay. Kind of low to mid-teen growth, well, is a realistic goal for our digital division. That's kind of internally how we budget. We're finishing up, well, we're midway through our budgeting process this year for next year, and that's kind of what we're targeting for all of our platforms. Okay. For Cisneros Interactive, which initially got you into Latin America, what distinguishes you from other digital advertising companies there? And talk about your competitive environment and whether that's evolved at all. Sure. Well, competitively, we are the only digital sales agency in Latin America licensed to sell Facebook advertising. So that's right there, a competitive advantage. Our biggest competitor is a private company called Aleph, based in Miami. They have a significant presence as well in Latin America, but they're private. And one of our biggest selling points with Facebook and other platforms is, you know, we're a New York Stock Exchange company, subject to Sarbanes-Oxley compliance, a company with complete transparency. You don't have to worry about the checks not showing up on time. You don't have to worry about the reports not being done on time. We're a company of checks, balances, and controls, and that's not insignificant when you're considering the risks that are prevalent when you're trying to do business in, you know, in a market like Latin America. And that gives us a pretty big competitive advantage against others in the space, in that part of the world. Okay, and now the relationship with Meta, can you talk a little bit more about the arrangement? What's the contract length of your partnership? And I know a few months ago, they informed you that your sales commissions were gonna change. I guess that's the curse and the blessing of working- It is. with someone like that. It is. But maybe you can touch on those different aspects- Yeah, sure. of the partnership. So generally, there's a contract for every country that we have in operations throughout Latin America. The contracts are generally two years in length. Meta retains, generally speaking, a 60- to 90-day cancellation clause. That's their way of holding our feet to the fire. With that said, we've never lost a Meta contract. And to your point, Mark Zuckerberg's, you know, self-proclaimed year of productivity, I think, is what he called it, you know, is impacting all of the vendors that they do business with. So they cut commissions for all their sales rep firms globally from 10% to 7%. That's gonna result in, if you're modeling this thing out, you know, probably a cash flow hit of around $7 million-$8 million for this year. And it's not insignificant, but the silver lining to all that, you know, we're in conversations with Meta. As they are re-rationalizing their workforce, you know, I think it's been well known and well documented that they've been on a headcount reduction drive. They're rethinking their presence in several markets adjacent to where we already are. So that could result in an opportunity for us to step in and take over operations. We're not there yet. We don't have anything to announce, but it's certainly something that we're talking to them about. Okay. And is this a unique... This reduction in sales commissions, is that unique to Meta, or is that something we should be thinking about as a risk for other clients you work with? And then relatedly, you had previously discussed 10% margins for the digital segment. Given the Meta action, how should we think about that target now, and when do you see getting there? Yeah, that 10% is probably not realistic right now. We sat at 5% at the end of second quarter. I think right now, and again, the drive for efficiency improvements, we're hoping to get that into the kind of high single-digit range over the next six months, just through efforts of just re-rationalizing how our back office operates and whatnot. So, but 10%, I think, is off the table, given the Facebook commission issue, so... And as far as other platforms are concerned, look, there's always that risk, right? TikTok is the other big platform we do business with. Contracts are structured, similar in nature. The good news with TikTok is their business, you know, their growth is explosive, so that offsets any pressure as far as the offset of commissions is concerned. But, yeah, there, there's always that risk. And what we're trying to do, you know, we're establishing new relationships with new platforms that hopefully we'll be able to announce in the next couple of weeks, and that's our effort to further diversify from, you know, the two global giants that we currently do business with. Okay. And with TikTok, that drives, I think, your MediaDonuts business. Yeah. Has recent performance been strong with them? And just like... I, I think you just hinted at this, but there's room for expansion similarly to Meta. Yeah. Well, so our TikTok business has been, you know, growing at 30%+ annualized rates, and our expectation is for that to continue. From a relationship standpoint, I'll say that our relationship with Meta is a much stronger relationship than with that of TikTok. So I think realistically, the geography expansion opportunity really lies with Meta, less so with TikTok. Okay. Smadex. Smadex. Smadex. Okay. Yeah. One day I'll- It's all right. ...... I'll get it right. It's a bit more seasoned within your portfolio. On the earnings call, you spoke to some headwinds. They're from crypto, fintech advertising. Yep. Is that softness continuing? How long should we think about the hangover there lasting, and how big a piece is Smadex of the overall digital segment? Sure. So we're, you know, we'll talk about Smadex on our third quarter call in November, but we're really pleased with what they have been doing over the past, over the past quarter and what we're seeing in the fourth quarter as well. So they've made a lot of adjustments to their business over the past two quarters. And while, you know, they kinda took a hit on the chin the first half of the year, second half of the year is going to look dramatically different for Smadex as a whole. So we're pleased with what we're seeing, and we'll get into more depth of why that is in November. Okay. Let's shift gears over to your television segment. You have 49 TV stations that generate around 15% of your revenues, but still, I believe, a large share of your cash flow. Cash flow, sure. A large business. And of course, you're the largest affiliate group for Univision- Yeah. Here in the U.S. Before we talk about your platform specifically, I'd be curious to hear your thoughts and your take on the recent Disney-Charter dispute and resolution, and what you think that means for the industry ecosystem as a whole, but, you know, also maybe for Entravision. Well, I think everyone held their breath when that came to a, you know, its apex, and when they finally announced the deal, there was a great sense of relief. You know, had that kind of face-off been sustained, I think you would have seen the whole distribution model collapse. I think we would have fallen off a cliff as an industry. And now what we're going to see instead is more of a continuation of what we've seen over the past several years. You're gonna, you're gonna see a continued focus on direct-to-consumer by the major content producers, but, you know, it, it's still a model that doesn't really work. You're gonna see a continued slow, kind of, over-the-top cord cutting, and that's gonna result in ultimately subscriber reductions, offset, perhaps maybe not dollar for dollar, but by rate increases. But what that has guaranteed, though, is a continuation of the system that we have, as opposed to just a train wreck of a system that could have resulted in just a stave off and no resolution being made. Okay. And- In my opinion. Yeah. What do I know? The Univision relationship represents a majority of your TV revenue. How would you describe the relationship now, given the merger with Televisa has seasoned a bit? Yeah. It's good. We've had several high-level meetings with upper management over the past several months, been very productive. There's much, there's much more of a dialogue going back and forth between our two organizations now than there ever has been. We've got some projects that we're working on together. And yeah, no, I would say there's been a significant improvement, particularly over the past, you know, six to nine months. Right. And you have a little bit of a unique setup from a retransmission fee perspective- Right. ... from other local broadcasters here at this conference. Can you just talk about what your expectations are for growth for your retransmission fees and how that works with Univision? Yeah. So, so we're seeing negative subscriber growth being offset by high single-digit rate increases. So that net-net is resulting in a flattish kind of growth projection for retrans revenue. What is tilting that slightly to the positive is the introduction of the virtual MVPDs that are out there. YouTube TV specifically has been in a very dynamic growth mode, and we're getting paid by them, and that has tilted the retrans projection into the positive, like low single digits. By itself, it has. I mean, it's not insignificant, the kind of growth that that operation has been seeing. Okay. A couple of years ago, they pulled a couple station affiliations. Any reason to think there's more to come on that front, as you sit today? Yeah, that was Florida. That was Orlando and Tampa, and then secondarily, D.C. There was a political motivation back in the day for Univision to make that move. Florida was generating a huge amount of political revenue. The irony is they're not anymore. But no, we have three other markets that kind of have similar profiles, the way we're structured, and I don't, I don't think... Yeah, we don't envision that happening. Okay. Your affiliation agreement with them is up for renewal, I think, in 2026. Yes. 12/31/2026. Would you expect that to get renewed? When do those discussions start? Yeah, we'll probably start having those discussions sometime in the next 12 months. Okay. That's my guess. Okay. I'd ask you what points you're going into those meetings for to kinda pull out of them, but I'm guessing you're probably not gonna wanna negotiate- Yeah- with them today. We don't wanna... Yeah, exactly. Okay. Exactly. How is the Univision content performing on your stations? They went through a rough patch years ago. I know- They did. ... there's been a renewed focus with the merger and new ownership and management, and maybe you can just talk about that. No, it's doing, it's doing really well. Look, some shows are doing better than others, but you know, if you look at overall ad impressions year-over-year, I think last there was an article came out yesterday, ad impressions were up over Univision, like 20%. So it's definitely a model that's been vastly improved with the merger, putting the content production in, you know, in sync with the distribution. So we've been pleased with that, and we're looking forward to having that continue. Okay. I know you're working with TelevisaUnivision's nascent streaming service, ViX, on the digital side of the house. Maybe you can tell us what you're doing for them, A, and then, B, I'm curious if the service is impacting your operations at all on the TV side from either a viewership or ad spend- Yeah. ... perspective, 'cause obviously, we talked about Disney Charter, one of the touch points there, I think the problems Charter has- Right. ... was that all this D2C content is being put out there and- Sure. ... and- Yeah, no, from a rating standpoint, we've really seen no material impact. So that's still a work in progress, but what we do for them, for ViX, we do two things: We sell advertising for them in Latin America. That's our Cisneros group, now EVC LatAm. So we have a contract to basically sell advertising throughout Latin America on the platform. And then Smadex, our mobile growth solutions group, is actually driving subscribers to ViX. So we've got a two-pronged relationship with ViX, that we're helping, helping them, you know, grow that, grow that business. Okay. So just a question on the revenue performance lately. You were down, I think, 8% in second quarter although core was up 1%. Within that, local was +4%, national was down 12%, similar kind of theme as we've heard from others. Yeah. Looking forward, you had core TV pacing down 10%, so a bit of a decel there. What's driving that trend. Any particular categories you'd call out? Yeah, two categories of note, top five categories, retail and restaurants. They were both hurting for us, and they're creating most of the drag as of late. The good news is, you know, the automotive category, which everyone would think would be somewhat problematic, given everything that's happening in Detroit with the union negotiations, that's been a healthy category for us. And really, it's because the drive, the ad spend is coming from the likes of the foreign auto producers, right? Toyota and Nissan, and they're... I, if I'm a betting man, I'd say they're looking to scoop up market share, you know, in a turbulent time here for the U.S. automotive sector. They're opportunistic and spending more heavily than they did at this time last year, and that's helping drive that category into the positive for us and picking up some of the slack that we're seeing in TV. A nd it sounds like maybe it's too soon, auto, with the strike here for the American producers, is it too early to see an impact from it? It's something if it drags out, maybe it starts to cause- It's too early. It's – we're not seeing an impact. Again, like I said, auto is a positive category for us, and it's a big category, so that's important. But look, if the strike drags on, all bets are off. But right now, what we're seeing from that vertical, we're pleased with. Okay. Political revenues, let's talk about that. Any early expectations on how next year is gonna go, how it may measure up to the past? Newsflash, orders started pouring in this week for this week. So, we're seeing already, you know, campaign money come in that we weren't expecting to see until midyear next year. So to the effect that that is a statement for what we should expect next year, we're telling our traffic department to get ready because there's a big wave coming. But we'll see. It's still early days, but we're already seeing the orders come in, and... We've We've seen some trickle in before this past week, this week, but this week, when the orders started coming in, it began to validate, you know, our thesis that it's going to be a, you know, it's going to be probably a record year for us politically. We've kind of internally soft-circled the $40 million bogey for political this for next year. That's up from $28 million in the last presidential cycle, and that's up from $32 million that we did in the last midterm cycle. So in the last midterm cycle, we went from around $13 million to $32 million, so we almost tripled. And the real reason for that is we've got one new competitor that's spending with us, and that's the GOP. Historically, the majority of our revenue politically has come from the Democrat side. Now, particularly along the Rio Grande Valley, you've got congressional seats that are 50/50, and Republicans are hell-bent on making sure that you know they maintain control of the House. And you can bet again, those seats are coming up again this coming year, that they're gonna spend in lockstep of what they did in last year. So you've also got the Senate seat, the Senate race in California, Dianne Feinstein's passing, and then that's going to be competitive environment, both in the primaries, which is in March. California is a mail-in state, right? So you've got to get that messaging out earlier than otherwise, and that means that fourth quarter, we should start seeing significant revenue for that race. So, and again, you know, Arizona, Nevada, California, Texas. Texas, which is morphing from red to purple, you know, right in front of us, and that's going to be the battleground for the next couple of presidential cycles, because that Texas may very well decide, you know, the races going forward, as opposed to Florida, which has kind of morphed into the red now. Yeah. Over the four to eight y ears. Based on the numbers you just laid out, maybe it answers the question I'm about to ask you, but do you think television can maintain its share of political spending? Radio, whatever share you'll see there, will be similar to what you've seen in the past? We do. Not a ton of leakage to digital or other- No, it's still television is a great medium to, to, you know, to, to get your political message out, and it's proven time and time again that it's the preferred medium for politicians and super PACs and what have you. And, yeah, we fully expect TV to continue being that strength into the next cycle. Radio generally does around 25% of our political, and with TV doing the balance, 75%, and we expect that balance to continue here. Generally, what happens is when TV starts to get sold out, then money starts pouring into radio, right? That's the next available medium. But it's interesting, the most recent orders that are coming in now are right now predominantly for radio in Spanish, which was something we weren't, we weren't, anticipating. Those numbers, like the $40 million for next year, that was soft-circled, that's a total number for you? That's a total number. Okay. That's right. All right. Got it. So, let's talk about radio for a moment. Don't wanna shortchange it. It, it's now around 6% of revenue, so it's certainly shrunk as a percentage of the whole. It's been a tough year for the whole industry. Sure. Your 2Q revenues were down 9% or 6%, excluding political, and for 3Q, you guided your core down 12%, or at least pacing there. Right. So like TV, a bit of a decel quarter-over-quarter. Yep. What's driving the weaker trends in radio? Is it a similar story as television? No, it's actually a very different story. So unlike TV, where national has been the drag while local is holding up, for radio, our local business has been the drag, while interestingly, national is actually up. And that's a preview for third quarter. Second quarter, you didn't see that. Second quarter, we had a couple of large advertisers. Well, I'll just use the word panic, and drastically reduced their ad spend, thinking that, you know, the rest of the year was a complete calamity. That ended up not happening, and they went back online with us, on the air with us in the third quarter. So, but yeah, it's a different situation with radio. We are in our markets, we are, more often than not, not the number one or two market station in that market, and if you're not one or two, you're missing out on the national spend. And, you know, that generally. It's just a much more competitive environment for us in radio than it is in TV, and that's been part of the problem. Just so I'm clear, though those couple large customers that panicked, that was on the local side? That was on the local side. Local side. Yeah. Okay, got it. Do you see the radio segment as a growth business overall for you? You just mentioned the tough dynamics from a market rank standpoint, but I guess that would be part A. And part B, is the segment still core to the overall business? Are there synergies still to owning that alongside television- Sure. -and digital? I don't know. It's hard to say that radio as a platform is a growth asset, but I will say this: it is certainly more resilient in Spanish than it is in English market in the country. Radio consumption patterns are very different in Spanish than they are in English. Walk by any major you know, public location where, whether it's construction activity or kitchens or whatnot, you're seeing you can hear the Spanish language radio blasting, right? I mean, it's just consumed very differently than it is in English. So with that said, you know, radio is still a very much a core asset for us. You know, we've got 11 markets where we operate TV and radio together under the same roof. Radio, in those markets, always outperforms our radio in standalone markets, just because we're able to package that radio with television to get a larger share of the buy. So definitely, radio remains a core asset to us. Okay. I'm gonna ask you to put on your CFO hat- Yes, CFO hat. around expenses and margins now. Sure. You did have an uptick in expenses in the second quarter. Right. ... up over 20% on a pro forma basis. Can you talk about what's driving that, and how we should really be thinking about a normalized rate of growth or cost base going forward? Yeah. So the first half of the year was a bit choppy on the expense growth side, so we had to build out some infrastructure with some of the acquisitions that we'd executed in prior years. That cost us a couple points. You also had some one-offs. We moved our radio operations into our corporate facility in Los Angeles, and that was supposed to be kind of a six-month process, beginning in September of last year, ending in March of this year. Because of COVID, we couldn't get the permits processed timely, so we actually didn't start that project until January. And because that project ran late, we had to keep our radio operations where they were running amok of our lease, so we had to pay double rent penalties for our radio division, so that drove up expense. So, you know, that represented in second quarter about $1 million in incremental expense. Secondarily, you know, historically, what we've done with company-issued RSUs for employees is we had liked to issue those in fourth quarter and expense all of those in fourth quarter. From a retention standpoint, it made more sense. This was earlier in the year when things were kind of in flux with Walter's recent passing, but we made the decision to issue the RSUs in the first quarter because you have a better retention policy, you know, for employees who now know what they're going to vest at the end of the year. But what you have to do then is instead of expensing that full vesting amount in one quarter, fourth quarter, you have to spread that expense evenly throughout the quarters of the three quarters of the year, with fourth quarter getting the benefit of a lower amount. So that drove the expenses up in first quarter and second quarter, and will drive the expense up in the third quarter as well. You know, if you had to normalize for all of that, I would look to see our operating expense on a normalized basis kind of settle in the kind of the mid- to high-single-digit increase range over the next couple quarters. Okay. And as we think about cash flow conversion, it, it seems to have slowed a little bit. Yep. You just walked through the expenses, but anything we should be thinking about on CapEx, taxes? Sure. So CapEx usually, for us, runs at around $10 million annually. This year, on a cash CapEx basis, it's gonna be about $16.5 million-$17 million. That's because of the build-out, again, at corporate, a one-off situation that we were hoping to kind of straddle last year and this year and cut it in half, and therefore, the burden wouldn't be as great, but it is what it is. So, look for CapEx on a more normalized basis to be back in the $10 million range going forward. Look, taxes are up, for us because we, historically, have had the benefit of NOLs working for us to help shield the tax, and those are gone. Those went away basically when the proceeds from the auction came in. On interest expense, I don't think I have to explain what's going on in the interest expense, you know. The good news is we've got $126 million some odd in cash that's being put to work, so you're getting a nice hedge against, at least a portion of that interest expense going up, as we're making money off the cash. Right. Right. So that's a good segue to talk about your liquidity, your capital allocation policy. So the nice thing is, with the balance sheet you have extended out your debt maturities earlier this year, so I don't need to worry or fret about that one. Maybe you can just quickly remind the audience. Sure. So we exited the institutional loan market in March of this year, and we did a pro rata bank deal, relationship deal with seven different banks. That's a five-year deal, runs through 2028. We closed that transaction when Silicon Valley Bank collapsed, so that was a fun couple of weeks to get a transaction closed, but we got that done. So maturity is all pushed out to 2028. We'll manage that debt balance accordingly with our cash. If the macro environment deteriorates from here, we'll keep in mind... You know, we'll be mindful of what our debt load is, and if we need to reduce debt and keep leverage in check, we'll do that. So right now, your leverage is under 2x. Is that where we should expect leverage to live for the business? How high would you be willing to take it if you saw the right acquisition opportunity? Well, if Walter were here, he would say 2.5x is what he's comfortable with. I, you know, I, I would say 3.25x, 3.5x... is kind of, we, we have a max covenant in our new debt deal of 3.5x, and that's net of $50 million of cash. So, you know, that's something to keep mindful of. We'll manage that, leverage calculation accordingly. We have a question. Are we going to questions? Let me ask one more—and then, and then we'll get to it. Okay. How should we think about capital allocation then? Given those comments around debt and leverage between the dividend share repurchases? Sure. Debt paydown, acquisitions, where do they rank? So, we just restored our dividend to pre-COVID levels back in February. So... And, And, you're getting at our current price, I think it's a 5.5% yield, which, you know what? That's pretty hefty. So, the dividend's where it needs to be. The debt is where it needs to be, and, you know, in the 2x zip code. But we'll manage that if we need to. Share buybacks, probably not at this point. We have a program that's been approved and authorized, but I don't think it's realistic to see us going back into heavy share buybacks right now. So, and look, there are always opportunistic acquisitions out there. Probably not. You shouldn't probably expect to see anything on that front, at least in the near term. We are, like I said, working on some exciting new announcements with new platforms. That's gonna suck up a lot of management bandwidth as we get brand-new relationships up and running in interesting regions of the world. So look for that to hit the news at some point in the near term, and that's gonna be what our focus is, just growing our business organically and growing out our relationships with new digital platforms. All right, great. We're about out of time, so we'll wrap it. Chris, thank you for- Thanks, Aaron. for being here. Thanks for having us. We'll get the questions on here offline. Okay. Thank you all. Thank you. Thanks for coming. All right. I got one fan out there.